Tech

How the Collapse of Nokia Is Igniting Europe's Next Silicon Valley

HELSINKI — Helsinki, Finland, is in one of its coldest, darkest months of the year, but yet, some of the hottest startups and investors meet in the remote Nordic region annually at this time to discover the next big thing in tech.

The Slush startup conference — which was held in Finland’s capital of Helsinki last week and founded five years ago by Finnish-based Rovio (Angry Birds) CMO Peter Vesterbacka — has become a gathering place for new businesses across Europe. Set up in the old space where Nokia did its research and made most of its phones during its heyday in the 1990s and early 2000s, Slush kicked off the event with a keynote from Finnish Prime Minister Jyrki Katainen, who wore (in true startup style) a blue hoodie as he discussed the need for innovation.

The story of Finland’s fascinating emergence as a hotbed for startups — quite possibly the next Silicon Valley of Europe — can’t be told without looking at Nokia, the once hometown hero of the country. If you were to ask a Finnish child 15 years ago where they wanted to work one day, the answer was almost always “Nokia.”

But as the company imploded in recent years — long before Microsoft acquired Nokia’s mobile division for $7.2 billion in September — former executives and staffers who left or were cut loose started to build their own businesses. Soon, hundreds of new companies popped up across the country.

The startup scene in Finland has a unique flavor that matches the country’s culture. In a nod to its love of saunas to keep warm during the cold months, many budding companies hold major meetings and negotiate deals inside heated vestibules, where it’s encouraged to strip down to get to the bottom line in a relaxed environment. Some offices even have “meeting saunas” for this very purpose.

You’re asked to take your shoes off when arriving at most startup offices too — a small effort to make employees feel at home, as much as it is to keep winter slush outside the office.

The gaming industry is especially flourishing in Helsinki, where even the graffiti acknowledges the trend.

Companies such as Rovio and more recently Supercell (Clash of Clans, Hay Day) continue to top the iOS mobile app charts and have reminded the Finnish it’s possible to hit it big without Nokia on top.

‘Too Big for Comfort’

When Nokia sold its mobile division to Microsoft this year, it was an emotional time for the Finnish who grew up with the manufacturer’s phones in their pockets. But nearly anyone you ask about the deal in Finland will say the sale was best for the country.

“It got to the point where Nokia made up 4% of the Finnish GDP and it was too big for comfort,” said Alexander Stubb, the Minister of European Affairs and Foreign Trade. “At the end of the day, what happened is good news. I wrote on Twitter at the time that the news was going to be emotional for people, but we would be better for it.”

Even Nokia itself admits it got “too big” for Finland, with the country essentially putting all eggs in one basket.

“It’s important for any country to have diversity,” said Samuli Hanninen, Nokia’s VP of product. “The move was a healthy one. Now, Finland has a strong Microsoft presence too, as well as growth from younger companies. The goal is to build strong products, and it will be great to have more resources, too, so we can all work together.”

Hanninen said Nokia’s corporate culture in Finland hasn’t changed too much following the Microsoft acquisition: “When Steve Elop started with Nokia a few years ago, that changed the culture for sure — we became more productive, faster,” he said. “So far, it seems Microsoft has the same sort of straightforward approach we have adopted, so it’s been a seamless transition.”

Emerging Startups

Stubb — who, like so many in Finland, proudly uses a Nokia 1020 smartphone and considers himself pretty tech-savvy — attributes the Finnish success story from going from a top 30 country in the world in terms of education to the top three to the tech sector and the rise of Nokia. But he also said the restructuring of Nokia plays a key role in job and economic development across Finland.

“When Nokia started to collapse, suddenly we had all of these intelligent engineers with seed money looking to build businesses of their own. Instead of just one tech giant here, it became a diversified tech hub.”

The Finnish people, often stereotyped as shy, are branching out. And while it was once considered to be a last resort to start your own company — a fear most dreaded by parents who want their children to succeed — it’s becoming “cool” in the country.

“The scene has been a slow build but recently exploded with such a force we have never seen before. After one company reaches success, others say, ‘Hey, why can’t I do that?’ These startups are completely fearless too — they celebrate failures as much as they do success,” he said.

Public Funding

Public sector group Tekes is behind a lot of the startup success in Finland, helping hundreds of companies get their feet off the ground with funding resources. In the 1990s, it financed 26% of Nokia's projects and has also given financial assistance to Rovio and Supercell.

“It’s difficult to copy and paste methods from one country to another, and I am reluctant to give advice because every scene is specific,” Stubb said. “[The] public sector can be a really good thing as long as it doesn’t become the norm. Rovio and Supercell have benefited from the public sector, but success is not always the case.”

In addition to startup growth and Microsoft setting up data centers in Helsinki, Google has invested 450 million euros in the region, and Japanese investors have recently plugged into Supercell, too.

Entrepreneurs are also working together. For example, Supercell CEO Ilkka Paananen is on the board for gaming company GrandCru, whose upcoming title Supernauts will enable players to build a new habitat on Earth once the ice caps melt. Favorable buzz around Supernauts could translate into Finland having another hit on its hands.

“We are a small country with 5.4 million people, so if someone succeeds, it is great for all of us,” Stubb said. “These startups view the world — not Finland — as their target market and competition.”

Startup Sauna

Following Rovio’s Vesterbacka success with Angry Birds in 2009, he handed off the Slush conference to Startup Sauna, a grassroots organization started by students at Aalto University in the suburbs of Helsinki.

When a group of business and tech students took a class trip to MIT several years ago, they were inspired by the startup community at the school. With no ecosystem for startups in all of Finland, the students asked Aalto for the keys to an old warehouse on campus for aspiring entrepreneurs to meet. Rumor has it they never gave back the key and it evolved into the startup breeding ground it is today.

In addition to offering a free working space with Wi-Fi and coffee for anyone interested, Startup Sauna has a wildly successful seed accelerator program. About 12 companies are selected twice a year for its bootcamp program to receive personalized coaching from participating entrepreneurs, including the chairman of Nokia and executives at Rovio, F-Secure and Supercell. Lawyers and marketing managers are also on hand to offer tips to participants.

“People always want to know what’s in it for the coaches, but many just want to help a program they wish existed when they started years ago,” said Natalie Gaudet, communications director at Startup Sauna. “Many coaches are investors, too, and they get to see a lot of the next-generation startups in the region before anyone else.”

The average Startup Sauna entrepreneur is between the ages of 30 and 35, typically those who completed their education and decided to try something new after several years in the workforce.

Popular app Wild Chords, which teaches people how to play chords in a game format, is among the successful startups to come out of the program. The team demoed their product on the main stage at Slush this year.

Education and AppCampus

Stubb also said teaching basic programming skills to young kids in the classroom is on the country's radar. The move would follow in the footsteps of neighboring country Estonia, which rolled out a program last year at 20 schools to teach elementary students basic coding.

“It would be a great idea to have coding as a subject in school,” Stubb said. “Kids today are growing up as natives to technology, and the sooner they get going, the better. It starts with games and familiarizing themselves with gadgets, and coding is a big part of that."

Finland is embracing coding education at the university level, too, via Aalto University's AppCampus program outside Helsinki. The mobile app accelerator program is funded by the school, along with Nokia and Microsoft, and is set up to spur app development for Windows Phones.

Startups from various countries around the globe, as well as founders of all ages, are now working with AppCampus to secure funding and become successful in the Windows Phone app store. They put a business card on a world map to mark the hometown of every participating startup in the program.

"Everyone knows that gaming is actually good for neurology and the brain," Stubb said. "Long gone are the days where parents tell you to stop. We're really excited about how the gaming community has taken off here and you can expect more from Finland very soon."

While Nokia's decline could have ushered in dark days for Finland, some careful planning, a willingness to adapt, boosts in education and some lucky breaks from Rovio and Supercell — the country is poised to ride a new wave of tech influence.

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